exercise more initiative and judgment in making procurement decisions. No amount of regulations or detailed instructions can substitute for a highly competent and motivated work force. The Federal Acquisition Institute which is under the control of the Office of Federal Procurement Policy was created to advance the professionalization of the work force. Our work in this area will be to act as a catalyst to support and advance the basic premise that any procurement system will only be as good as the quality of people tasked to operate it. MULTIYEAR CONTRACTING Existing statutes preclude multiyear procurements using annual or limited year appropriations, unless specifically authorized by law. Federal agencies may only obligate funds in a fiscal year for which the appropriation is made and only for needs arising during that fiscal year. The restriction on entering into multiyear contracts has prevented Federal agencies from taking advantage of several areas where savings may be achieved. They include: --Reducing recurring award and administration costs on a series of contracts over a span of time, to nonreoccuring administrative costs for only one contract over the same period, --Reducing contract material costs through discount price breaks realized by purchase of materials in more economic order quantities, --Avoiding impact of price escalation on out year material purchases, --Increasing efficiencies resulting from continuity of work and stability of the work force, and --Enabling contractors to invest in cost saving machinery and equipment and having an adequate contract period to amortize such equipment. In those cases where special statutory authority to use multiyear contracting has been granted, Federal agencies have saved money. A review of selected cases prompted us to recommend that the Congress enact legislation to authorize multiyear contracting for all agencies using annual appropriations. We have recently clarified our position to draw a distinction between multiyear procurement by the Department of Defense for major end items and procurement for spare parts, supplies and services. Multiyear procurement of end items offers the greatest opportunity for savings. But because of the lack of experience in buying major items (like an F-16) using multiyear contracting, the Department of Defense should select a few systems for a pilot test. In order for programs of this type to be accomplished, there must be comprehensive and sophisticated planning in full detail by the agency and its prime contractors, and between prime and subcontractors. The analyses must include the optimum rates of production from the contractor's viewpoint, and the optimum rates of delivery and deployment from the user's viewpoint. From the businessman's perspective, studies must be conducted of the opportunities for productivity enhancement through acquiring new capital equipment, to be amortized over the multiyear production period; and the most economic plans for buying, in advance, components, parts, and materials; and for recruiting and training the work force. To assure that risks are reasonable, appropriate economic adjustment formulas must be developed, and progress payment schedules established. Based on all of these considerations, the Government's liability in event of cancellation, at the end of each year, must be defined in the form of a cancellation ceiling. Finally, we must be sure that the attractiveness of highly visible benefits do not obscure or override risk factors such as changes in force structure, threat, technology, inflation, or domestic priorities. We believe that it is highly desirable to encourage the Department of Defense to proceed with the selection of candidate weapon systems for multiyear contracts and to work out, in detail, the plans such as those sketched above. The Office of Federal Procurement Policy is now in the process of recommending multiyear contracting which will apply broadly to all supplies, services, and commodities used repetitively by Federal agencies. Since it is developing uniform groundrules, which we support, to be used by all agencies for procurement of these items using multiyear contracting, we believe it would be desirable to wait for their proposal. CONTRACTING-OUT UNDER OFFICE OF MANAGEMENT AND BUDGET CIRCULAR A-76 As early as 1955, the Federal Government's executive branch established a basic policy for reliance on the private sector to provide commercially available goods and services. This policy, subsequently dubbed "contracting-out" is currently embodied in the Office of Management and Budget Circular A-76, revised March 29, 1979. Since its inception, this policy has been subject to controversy involving the Congress, the executive branch, industry, and Federal labor unions. Private sector firms, for example, view in-house performance as a multibillion dollar industry competing with private enterprise, and Federal unions view contracting out as uneconomical and a threat to the jobs and financial security of affected civil servants. The current policy, as expressed in A-76, requires a rigorous comparison of contract versus in-house costs to decide how the work will be done. This comparison is done once the feasibility of private performance has been determined and there are no overriding factors requiring in-house performance. Recent In September 1978, we reported on the widespread confusion, lack of knowledge and understanding, and reluctance to carryout the program. In addition, Federal agencies seldom prepared cost comparisons. These findings prompted us to recommend the Congress endorse, through legislation or otherwise, a national policy of relying on private enterprise to the maximum extent feasible, insofar as doing so is consistent with the national interest and within the framework of procurement at reasonable prices. statements by the Office of Federal Procurement Policy discloses continuing areas where significant, potential savings and/or elimination and reallocation of civilian positions continue to exist. The Office of Management and Budget, initially opposed to a legislative remedy, has now dropped its opposition to a congressionally mandated policy on contracting out. We believe the Congress should establish a national policy. CONSULTING SERVICES The Federal Government spends billions of dollars on consulting and related services. These services range from relatively simple studies to aid in management decisions to complex engineering support of major systems. attention focused on the use of these services by Federal agencies over the past 20 years, serious and pervasive problems continue to exist. Despite significant These problems are rooted in a lack of understanding of what constitutes consulting and related services and the |